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Aurora Cannabis Inc.

Canadian Cannabis

Neil Maruoka, MSc, MBA | Analyst | Canaccord Genuity Corp. (Canada) | nmaruoka@canaccordgenuity.com |
Canadian Equity Research 1.416.869.3073
29 June 2017 Matt Bottomley, CPA, CA, CBV | Analyst | Canaccord Genuity Corp. (Canada) | mbottomley@canaccordgenuity.com |
1.416.867.2394
Matthew Reitsma | Associate | Canaccord Genuity Corp. (Canada) | mreitsma@canaccordgenuity.com | 1.416.869.7703
SPECULATIVE BUY
unchanged
PRICE TARGET C$3.25
unchanged Company Update
Price (28-Jun) C$2.16
Ticker ACB-TSXV
Aurora provides positive update
52-Week Range (C$): 0.05 - 3.95 Aurora has provided a positive update on its Canadian operations, highlighting solid
Avg Daily Vol (000s) : 2,873.1
Market Cap (C$M): 805
patient growth and accelerating sales of cannabis oils. The company reported more than
Shares Out., Basic (M) : 360.5 16,000 active registered patients, a 22% increase since the end of Q3 (March 31). With
Shares Out., Basic + Dil. (M) : 381.3 the launch of its cannabis oils products in April 2017, the company announced record
Total Return to Target (%) : 54.0 monthly revenue in May of $2.4 million, a 38% increase over the average monthly sales
Net Debt (Cash) (C$M): (58)
for the third quarter (January through March of this year). Additional updates included
Long-Term Debt (C$M): 103.7
a modest price increase in May, a two-year license renewal for its existing production
FYE Jun 2016A 2017E 2018E 2019E facility, and a vault upgrade. We view the license renewal to be positive validation from
Revenue (C$M) 1 27 192 379 Health Canada of Auroras cultivation practices.
SG&A (C$M) 4.7 14.7 70.4 139.8 Our un-risked analysis for Aurora suggests a valuation in excess of $5.00 per share
R&D (C$M) 0.6 0.2 1.4 2.3 if marijuana is legalized in Canada, supporting our SPECULATIVE BUY rating as the
EBITDA1 (C$M) (6.0) 7.9 80.2 173.2 pathway to the rec market further unfolds this year. We would remain buyers of the stock
EPS2 (C$) (0.04) 0.01 0.15 0.34 ahead of construction milestones for the Aurora Sky facility and significant industry
1Adjusted
catalysts expected in coming months.
2Adj & diluted

3.5
Investment highlights
3
CanvasRx continues to expand its geographic footprint. CanvasRx continues to
expand its presence, growing to 24 cannabis clinics across Canada. We believe that
2.5 CanvasRx is an important driver of the companys patient growth, having facilitated
2
over 6,800 patients registering with Aurora, or ~42% of its patient base.
1.5
Aurora Sky tracking for late-2017 production. Aurora provided another update on its
800,000 square foot Aurora Sky hybrid greenhouse, reporting that one-quarter of its
1 planned footprint has been erected so far. At a total cost of ~$110 million, the facility
0.5 is expected to commence production in late-2017. Full construction is expected to be
complete in 2018, with full production reached the following year.
0
Balance sheet should fund Auroras aggressive growth plans. Aurora ended the most
May-17
Aug-16

Mar-17
Nov-16

Apr-17
Dec-16

Feb-17
Sep-16

Jun-17
Oct-16

Jan-17
Jul-16

recent quarter with pro forma cash and equivalents of $111 million, which we believe
ACB should be more than sufficient to fund the construction of its Aurora Sky cannabis
Source:FactSet
S&P/TSXVentureComposite(rebased)
greenhouse facility and advance its Canadian and international strategies.
Priced as of close of business 28 June 2017 Valuation
We value Aurora using a sum-of-the-parts analysis; the medical cannabis market based
on a DCF model, using a 13.0% WACC and 2.0% terminal growth, and the higher-risk
rec opportunity is valued using a probability-weighted NPV. Based on this analysis, we
are maintaining our target price of $3.25. For Aurora, we note that the entire medical
opportunity represents ~$1.82 per share (providing a stable underpinning to our
valuation), while our risked valuation of the rec market reflects the remaining ~$1.40 per
share in our target price.

Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX)
The recommendations and opinions expressed in this research report accurately reflect the research analyst's personal, independent and objective views about any and all
the companies and securities that are the subject of this report discussed herein.

For important information, please see the Important Disclosures beginning on page 3 of this document.
Aurora Cannabis Inc.
Company Update

Figure 1: Summary sheet


Company Description Consolidated Balance Sheet
Aurora is a Licensed Producer (LP) of medical cannabis, having obtained its license to Year end June 30 $000s 2016A 2017E 2018E 2019E
sell marijuana in November 2015. The company currently operates out of a customized Cash 170 88,104 75,041 136,472
55,200 square foot indoor growing facility located in Cremona, Alberta, with the capacity
Current Assets 5,244 104,272 135,585 265,818
to produce ~8,000KG of cannabis per year. Aurora has formalized plans to expand its
production footprint by ten-fold, to ~800,000 square feet that will add an additional Fixed Assets 11,370 36,634 71,177 74,868
~100,000KG of capacity. Total Assets 18,397 142,688 208,544 342,469
Current Liabilities 7,995 8,676 20,313 32,068
Debt 10,487 101,047 101,047 101,047
P&L Forecasts Shareholders Equity 5,962 39,012 93,231 215,401
Year end June 30 $000s 2016A 2017E 2018E 2019E
Kgs of cannabis sold 257 3,254 24,767 45,720 Total Liabilities & S/E 18,397 142,688 208,544 342,469

Ave. Price per gram $ 5.60 $ 7.78 7.57 8.21 Revenue Forecasts

Revenue 1,439 26,956 192,265 379,313


600,000 $8.40
Production Costs 2,241 4,022 40,210 64,008 $8.30
Operating Expenses 6,793 17,533 76,736 148,161 500,000
$8.20
Adj. EBITDA (6,017) 7,933 80,225 173,233 400,000
$8.10

Depreciation/Amortization 593 612 2,707 3,559 $8.00


300,000 $7.90
Interest Expense (Income) 73 2,050 2,050 2,050
$7.80
Income Before Taxes (5,872) 4,482 73,269 165,095 200,000
$7.70
Taxes 0 0 19,050 42,925
$7.60
100,000
Net Income (5,723) 5,166 54,219 122,170 $7.50
Shares o/s (basic) 128,988 323,546 323,546 323,546 0 $7.40
2017 2018 2019 2020
Shares o/s (FD) 128,988 339,636 339,636 339,636
Revenue Revenue per gram
EPS - FD (0.04) 0.01 0.15 0.34

Cash Flow Forecasts Production Forecasts in Kilograms


Year end June 30 $000s 2016A 2017E 2018E 2019E
Net Income (5,723) 5,166 54,219 122,170 60,000
Adj, EBITDA (6,017) 7,933 80,225 173,233
50,000
Change in Working Capital (286) 17,705 36,658 26,976
Cash Taxes - - - 19,050 40,000
Capex 1,885 25,000 37,250 7,250
30,000
Free Cash Flow (7,616) (22,458) 3,178 85,649
20,000
Growth Analysis
Year end June 30 $000s 2016A 2017E 2018E 2019E 10,000
Revenue nmf nmf 613% 97%
0
EBITDA nmf nmf 911% 116%
2017 2018 2019 2020
Net Income nmf -190% 950% 125% Total kgs sold Kgs sold (Medical) Kgs sold (Recreational)

Margin Analysis Valuation Ratios


Year end June 30 $000s 2016A 2017E 2018E 2019E Year end June 30 $000s 2017 2018 2019
Gross Margin nmf 82% 79% 83% Enterprise Value / Revenue 21.6x 3.0x 1.5x

EBITDA nmf 29% 42% 46% Enterprise Value / EBITDA 73.5x 7.3x 3.4x

Net Income nmf 19% 28% 32%

Source: Company Reports, Canaccord Genuity estimates

2
Speculative Buy unchanged Target Price C$3.25 unchanged | 29 June 2017 Canadian Cannabis 2
Aurora Cannabis Inc.
Company Update

Appendix: Important Disclosures


Analyst Certification
Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the
recommendations and opinions expressed in this research accurately reflect the authoring analysts personal, independent and
objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring
analysts coverage universe and (ii) no part of the authoring analysts compensation was, is, or will be, directly or indirectly, related to the
specific recommendations or views expressed by the authoring analyst in the research.
Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associated persons of
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with a subject company, public appearances and trading securities held by a research analyst account.
Sector Coverage
Individuals identified as Sector Coverage cover a subject companys industry in the identified jurisdiction, but are not authoring
analysts of the report.

Investment Recommendation
Date and time of first dissemination: June 29, 2017, 09:44 ET
Date and time of production: June 29, 2017, 09:44 ET
Target Price / Valuation Methodology:
Aurora Cannabis Inc. - ACB
We value the medical cannabis market based on a DCF model, using a 13.0% WACC and 2.0% terminal growth; the higher-risk rec
opportunity is valued using a probability-weighted NPV. Together, these two analyses yield a target price of C$3.25.
Risks to achieving Target Price / Valuation:
Aurora Cannabis Inc. - ACB
Key risks for Aurora Cannabis include, but are not limited to: continued patient uptake in the medical market; uncertainty pertaining to
the potential recreational market in terms of pricing, distribution and regulation; pressure on margins if/when the industry transitions
to a wholesale model; reliance on Health Canada to continue to renew production/sales licenses; the potential for unfavorable public
opinion if products are not used responsibly; increased competition from other LPs if production capacity continues to expand industry
wide; the reliance on agricultural operations that are subject to external factors (climate, etc); and, execution risk and achieving lower
cost production associated with planned facility expansions.

Distribution of Ratings:
Global Stock Ratings (as of 06/29/17)
Rating Coverage Universe IB Clients
# % %
Buy 580 60.99% 40.17%
Hold 271 28.50% 20.66%
Sell 26 2.73% 15.38%
Speculative Buy 74 7.78% 68.92%
951* 100.0%
*Total includes stocks that are Under Review

Canaccord Genuity Ratings System


BUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.
HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months.
SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months.
NOT RATED: Canaccord Genuity does not provide research coverage of the relevant issuer.
Risk-adjusted return refers to the expected return in relation to the amount of risk associated with the designated investment or the
relevant issuer.
Risk Qualier
SPECULATIVE: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental criteria. Investments in the
stock may result in material loss.

Speculative Buy unchanged Target Price C$3.25 unchanged | 29 June 2017 Canadian Cannabis 3
Aurora Cannabis Inc.
Company Update

12-Month Recommendation History (as of date same as the Global Stock Ratings table)
A list of all the recommendations on any issuer under coverage that was disseminated during the preceding 12-month period
may be obtained at the following website (provided as a hyperlink if this report is being read electronically) http://disclosures-
mar.canaccordgenuity.com/EN/Pages/default.aspx

Required Company-Specific Disclosures (as of date of this publication)


Aurora Cannabis Inc. currently is, or in the past 12 months was, a client of Canaccord Genuity or its affiliated companies. During this
period, Canaccord Genuity or its affiliated companies provided investment banking services to Aurora Cannabis Inc..
In the past 12 months, Canaccord Genuity or its affiliated companies have received compensation for Investment Banking services from
Aurora Cannabis Inc. .
In the past 12 months, Canaccord Genuity or any of its affiliated companies have been lead manager, co-lead manager or co-manager of
a public offering of securities of Aurora Cannabis Inc. or any publicly disclosed offer of securities of Aurora Cannabis Inc. or in any related
derivatives.
Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Investment Banking
services from Aurora Cannabis Inc. in the next three months.
For the purposes of UK regulation, as of the month end immediately preceding the date of publication of this research, on the date of
publication of this research, or the prior month end if publication of this research is within 10 days following a month end, Canaccord
Genuity or its affiliated companies, in the aggregate, beneficially owned 0.5% or more of any class of the total issued share capital or
other common equity securities of Aurora Cannabis Inc. or held any other financial interests in Aurora Cannabis Inc. which are significant
in relation to the research (as disclosed below).
An analyst has visited the material operations of Aurora Cannabis Inc.. No payment was received for the related travel costs.
Aurora Cannabis Inc. Rating History as of 06/28/2017
I:SB:C$2.75 SB:C$3.15 SB:C$3.25
11/02/16 12/14/16 05/03/17
C$3.50
C$3.00
C$2.50
C$2.00
C$1.50
C$1.00
C$0.50
C$0.00
Jul 14 Oct 14 Jan 15 Apr 15 Jul 15 Oct 15 Jan 16 Apr 16 Jul 16 Oct 16 Jan 17 Apr 17

Closing Price Target Price


Buy (B); Speculative Buy (SB); Sell (S); Hold (H); Suspended (SU); Under Review (UR); Restricted (RE); Not Rated (NR)

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Speculative Buy unchanged Target Price C$3.25 unchanged | 29 June 2017 Canadian Cannabis 4
Aurora Cannabis Inc.
Company Update

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Speculative Buy unchanged Target Price C$3.25 unchanged | 29 June 2017 Canadian Cannabis 5
Aurora Cannabis Inc.
Company Update

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Speculative Buy unchanged Target Price C$3.25 unchanged | 29 June 2017 Canadian Cannabis 6

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